FUGITIVE DICTATOR OF PARAGUAY BUSY SPREADING TROUBLE

Former Gen. Lino Oviedo, the fugitive Paraguayan political boss who is suspected of ordering the assassination of his archrival in March, appears to spread strife wherever he goes.

Five months after fleeing Paraguay for Argentina, Oviedo has become a divisive issue in Argentine politics and in South America's increasingly tense Mercosur trading bloc. He may also become a test case in a region trying to end a tradition of impunity for dictators, military strongmen and others of their ilk.

A week ago, Argentine leaders enraged Paraguayan counterparts by rejecting Asuncion's extradition bid for Oviedo. He is the chief suspect in the deaths of Paraguayan Vice President Luis Maria Argana and of eight pro-democracy protesters who were killed in street violence that pushed Paraguay to the brink of anarchy. The crisis culminated with the exile of Oviedo and his handpicked president.

Paraguayan authorities also want Oviedo to finish serving a 10-year sentence he received for leading an attempted coup in 1996. And U.S. officials are among those who publicly express suspicion that Oviedo has ties to Paraguay's multibillion-dollar smuggling underworld.

Nonetheless, the government of Argentine President Carlos Menem decided to honor the political asylum that was granted to Oviedo when he arrived in the country on a private plane in late March. Placing Oviedo in extradition proceedings would be illegal, Argentine diplomats argue.

Paraguay retaliated by withdrawing its ambassadors from Argentina and Uruguay; the latter nation denied extradition of an Oviedo ally accused of committing fraud while defense minister.

Paraguay's president complained that Argentina has "contributed to impunity." And with no shortage of harsh language, Paraguayan and Argentine leaders accused Menem of protecting Oviedo for personal reasons.

"What does this bond between Menem and the dictator Oviedo hide?" asked legislator Carlos "Chacho" Alvarez, opposition candidate for vice president in Argentina's October elections. "The actions of the Argentine government are an embarrassment."

Oviedo reportedly has a friendship with Menem and the Argentine leader's former security chief. Paraguayan legislators said last week that they are investigating whether Menem and Oviedo have a business relationship as well.

Menem, who is not running in October elections and will step down after 10 years in power, called the accusations "pure lies" and political opportunism. But the unusually nasty conflict among the Mercosur partners worries Argentine leaders. In the dispute, Paraguay has sought the help of Brazil, the bloc's dominant partner, which recently clashed with Argentina over trade issues.

In the assassination case, witnesses implicated street-level henchmen as well as two Paraguayan politicians who allegedly planned the March 23 attack with Oviedo in the town of Pedro Juan Caballero, a drug-trafficking center. As in other Latin American political crimes, though, the investigation has moved slowly.

In recent weeks, Paraguayan officials have alleged that an unrepentant Oviedo has violated the terms of his asylum by orchestrating a long-distance campaign to destabilize the Paraguayan government.

After Paraguay's fledgling democracy survived the crisis of March, the formation of a historic coalition government raised hopes of progress. But as politics slide back into infighting and uncertainty, Paraguayans have been alarmed by incidents that authorities have linked to Oviedo forces, including the discovery of a weapons cache and the disappearance of 30 anti-tank missiles.

Meanwhile, the spectacle of an international fugitive getting VIP treatment from the Argentine government gives potent ammunition to critics. The former cavalry general, 55, has divided his time between a country ranch and a suburban mansion, all the time guarded by a squad of Argentine commandos.

Argentine leaders may try to dampen the conflict by moving Oviedo to a remote location in the country's Patagonia region and theoretically reducing his access to allies in Buenos Aires and Paraguay.